We reach our vision and targets by developing a strong execution-centric performance culture relying on empowered personnel. Motivated and enterprising people are the key to success and the successful execution of our strategy.

Remuneration at Neles

The objective of our remuneration principles is to attract, retain and reward our people. Neles supports, develops and encourages our people as individuals and as team members to perform and to help us achieve our targets and to strive for performance excellence. Total remuneration structures may vary by country and are aligned with Neles’ financial performance as well as with internal and external references. We monitor remuneration levels for similar positions among peer companies.

Remuneration Policy and Remuneration Report

Remuneration Policy for the company, approved in Metso’s Annual General Meeting on June 16, 2020, describes the remuneration principles and framework for the President and CEO and for the members of the Board of Directors of Neles. The policy will also be applied to Deputy CEO.

Remuneration Report describes the implementation of the company’s remuneration policy and provides information on the remuneration of its Board of Directors and President and CEO during the financial year. Due to the partial demerger of Metso Corporation on June 30, 2020, in the Remuneration Report for the year 2020 the reporting period from January 1 to June 30 is based on the remuneration of Metso Corporation and from July 1 to December 31 based on the Neles Corporation.

The Remuneration Policy and Remuneration Report have been developed in accordance with the remuneration principles, the 2020 Finnish Corporate Governance Code issued by Finnish Securities Market Association, and the requirements set forth by the amended EU Shareholders’ Rights Directive, which has been implemented in Finland mainly through the Limited Liability Companies Act, Securities Markets Act, Decree of the Ministry of Finance.

Neles Remuneration Policy

Neles Remuneration Report 2020

The Annual General Meeting decides on the remuneration of the members of the Board for one term of office at a time.

According to the decision of the 2020 Annual General Meeting, the annual fees that will be paid to Neles Board members in 2020 are:

Chair EUR 115,000
Vice Chair EUR 65,000
Other members EUR 50,000

 

Additional remuneration:

Chair of the Audit Committee (AC) EUR 15,000
Chair of the Remuneration and HR Committee (RHRC) EUR 7,500
Committee members (AC) EUR 7,500
Committee members (RHRC) EUR 3,750

 

Meeting fees based on residence:

Nordic countries EUR 800
Other European countries EUR 1,600
Outside Europe EUR 3,200

Compensation for travel expenses and daily allowances is paid in accordance with our travel policy.

As a condition for the annual remuneration, the members of the Board of Directors of Neles Corporation are obliged, directly based on the Annual General Meeting’s decision, to use 40% of the fixed total annual remuneration for the purchase of Neles Corporation shares from the market at a price formed in public trading, and the purchase is to be carried out within two weeks from the publication of the interim review for the period following the registration of the completion of the partial demerger of Metso Corporation.

The remuneration paid to the President and CEO is determined by the Neles Board. Neles’ President and CEO is entitled to participate in short- and long-term incentive programs. The terms and conditions of these programs are decided by the Board.

Annual Salary

Total annual salary EUR 505,000 including fringe benefits (mobile and health insurance).

Short-term incentive (Annual bonus)

The maximum bonus is 80% of the total annual salary. The performance criteria are determined on the basis of Neles key strategic and financial targets decided by the Board.

Long-term incentives (Performance Share Plan)

The purpose of the plan is to align the interests of Neles’ management and shareholders in creating shareholder value. According to the Long-term Performance Share Plan, the maximum share allocation for the President and CEO corresponds to 150 percent of the total annual salary.

Ongoing Performance Share Plans:

Performance period 2020-2022 2021-2023
Performance measures

Earnings per share

Relative Total Shareholder Return

Earnings per share

Relative Total Shareholder Return
Potential reward payment In shares and partly in cash in 2023 In shares and partly in cash in 2024
Total number of shares Maximum allocation 75 750 shares Maximum allocation 75 750 shares

Pension

The retirement age for the President and CEO is 64 years and 4 months (based on Finnish legislation), unless otherwise to be agreed by the Company and the President and CEO. The President and CEO is entitled to participate in a supplementary defined contribution pension plan. The supplementary pension contribution is equivalent to 20% of the annual salary.

Termination of assignment

The notice period for both parties is 6 months. Severance pay is the full monthly salary multiplied by 12 if the agreement is terminated by the company.

The Board’s Remuneration Committee decides on the compensation and benefits of the other Executive Team members based on the President and CEO’s proposal. The total remuneration comprises a total annual salary, customary fringe benefits, pension as well as short- and long-term incentives.

Participation in variable compensation programs is based on the respective terms and conditions of the program. The Remuneration Committee evaluates the achievement of the targets for the Executive Team members, excluding the President and CEO.

Short-term incentive (Annual bonus)

Performance period 2020 2021
Incentive based on Company level and business specific financial and operational targets as well as strategic individual targets Company level and business specific financial and operational targets as well as strategic individual targets
Maximum reward 50% or 60% of the annual base salary depending on the role 50% or 60% of the annual base salary depending on the role
Potential reward payment March-April 2021 March-April 2022

 

Long-term incentive

Performance period 2020-2022 2021-2023
Performance measures

Earnings per share

Relative Total Shareholder Return

Earnings per share

Relative Total Shareholder Return
Potential reward payment In shares and partly in cash in 2023 In shares and partly in cash in 2024
Maximum reward opportunity The maximum allocation of shares is based on the role 80 – 100% percent of the annual base salary The maximum allocation of shares is based on the role 80 – 100% percent of the annual base salary

Other employment terms and conditions

Notice period for the Executive Team members is six months for both parties. If the company terminates the agreement, there is an additional severance pay equaling six times the last total monthly salary.

Additional pension benefit in the form of a defined contribution pension plan equaling 10% of base salary. The Executive Team members are entitled for life and permanent disability and health insurances.

Executive Team Remuneration in 2020

2020

Fixed annual salary Short-term incentive Long-term incentive Benefits Pension Plans Total €
Neles Executive Team (H2/2020) 857 250 - - 88 200 110 822 1 056 272
Metso Executive Team (H1/2020)

1 570 795

630 980

789 462

20 577

134 627 3 146 441

The Board decides on and implements Neles’ long-term incentive plans. The purpose of these plans is to align the interests of Neles’ operative management and shareholders. The plans also aim to ensure long-term commitment of management and to offer them a competitive reward scheme.

Any shares to be potentially rewarded in these incentive plans are acquired through public trading, and therefore have no diluting effect on the share value. Share repurchase- and share issue authorizations are obtained from the Annual General Meeting. Current valid authorizations are presented on our website at www.neles.com/investors/governance/board. There are no options outstanding or available from any of Metso’s prior option programs.

Neles applies a share ownership recommendation policy for the members of the Executive Team and for the President and CEO. In accordance with this policy, at least 50 percent of the share rewards (net shares after deduction of the applicable payroll tax) received by these individuals under the Performance Share Plans shall be retained until the share ownership of the individual Neles participant amounts to his/her annual gross base salary.

If, for reasons relating to the participant, the participant’s employment or service ends before the reward payment, no reward will be paid from the long-term incentive plans.

Performance Share Plan

The Performance Share Plan consists of annually commencing individual performance share plans, each with a three-year performance period, followed by the payment of the potential share reward. The commencement of each new individual plan is subject to a separate Board approval.

Performance Share Plan 2021-2023

PSP 2021-2023 commenced as of the beginning of 2021 and the potential share rewards thereunder will be paid in the spring 2024, provided that the performance targets set by the Board of Directors for this plan are achieved. The potential share reward under PSP 2021-2023 will be paid based on the performance targets relative total shareholder return of Neles' share and earnings per share (EPS).

The members of Neles Executive Management Team are eligible to participate in PSP 2021-2023. If all the performance targets set for PSP 2021-2023 are fully achieved, the aggregate maximum number of shares to be paid based on this plan is approximately 277,000 shares (referring to gross earnings before the withholding of the applicable payroll tax).

Performance Share Plan 2020-2022

The first plan, PSP 2020–2022, commenced as of the beginning of 2020 and the potential share reward thereunder will be paid in spring 2023, provided that the performance targets set by the Board of Directors are achieved. The potential reward will be paid in listed shares of Neles.

The potential share reward under PSP 2020–2022 will be paid based on the performance targets of relative total shareholder return of Neles’ share and earnings per share (EPS). The members of the Neles Executive Team are eligible to participate in PSP 2020–2022.

If all the performance targets set for the first plan, PSP 2020–2022, are fully achieved, the aggregate maximum number of shares to be paid based on this plan is approximately 280,000 shares (referring to gross earnings before the withholding of the applicable payroll tax).

Restricted Share Plan

The Restricted Share Plan consists of annually commencing individual restricted share plans, each with a three-year retention period, after which the share rewards granted within the plan will be paid to the participants in listed shares of Neles. The commencement of each new individual plan is subject to a separate Board approval.

The purpose of the Restricted Share Plan is to serve as a complementary long-term retention tool for individually selected key employees of Neles in specific situations.

Restricted Share Plan (RSP) 2021 - 2023

RSP 2021-2023, commenced as of the beginning of 2021 and the share rewards potentially granted thereunder will be paid in the spring 2024.

The purpose of the Restricted Share Plan is to serve as a complementary long-term retention tool for individually selected key employees of Neles in specific situations.

The aggregate maximum number of shares to be paid based on RSP 2021-2023 is approximately 46,000 shares (referring to gross earnings before the withholding of the applicable payroll tax).

Restricted Share Plan 2020-2022

The first plan, RSP 2020–2022, commenced as of the beginning of 2020 and the share rewards potentially granted thereunder will be paid in spring 2023.

The aggregate maximum number of shares to be paid based on RSP 2020–2022 is approximately 46,000 shares (referring to gross earnings before the withholding of the applicable payroll tax). No nominations were made for RSP 2020-2022.

Deferred Share Unit Plan

Deferred Share Unit Plan (DSUP) is a long-term share value-based incentive plan that aligns and rewards the employee’s performance and Neles share value development during a performance period. The reward is payable after three years of the program commencing if the terms of payment are met. The commencement of each new individual plan is subject to a separate Board approval. Neles Executive Team members aren’t eligible to participate in the DSUP plan.

The DSUP rewards its participants for individual and company and/or business unit level performance during a one-year performance period. The reward potentially earned during the one-year performance period is converted to synthetic share units for an approximately two-year share price performance period, after which the reward is paid in cash based on the value of the share of Neles at the time of payment. Notwithstanding this, the company is entitled to decide whether the reward is paid in cash or in shares of Neles.

Deferred share unit plan (DSUP) 2021 - 2023

DSUP 2021 – 2023 is the first individual plan within the DSUP structure. DSUP 2021-2023 commences as of the beginning of 2021 and the potential reward thereunder will be paid in cash in the spring 2024, provided that the performance targets set by the Board of Directors for this plan are achieved. The maximum amount of participants in the plan is 40.

If all the performance targets set for DSUP 2021-2023 are fully achieved, the aggregate maximum monetary amount of rewards payable based on this plan and estimated on the date hereof is approximately EUR 1.7 million (referring to gross earnings before the withholding of the applicable payroll tax). The final maximum value of the rewards may deviate significantly from this estimate based on the development of the value of Neles share during the afore-mentioned share price performance period.

Other terms

The value of the reward payable to each participant based on each of the afore-described plans is limited by a maximum cap linked to Neles' share price development.

Neles applies a share ownership policy to the members of Neles Executive Management Team. According to this policy, each member of Neles Executive Management Team is expected to retain in his/her ownership at least half of the shares received under the share-based incentive programs of the company until the value of his/her share ownership in Neles corresponds to at least his/her annual gross base salary.

More on governance at Neles